There is little that is going to change about Alberta’s royalty rates.
The Albertan government royalty review panel has recently released their findings in a 206-page report, ‘Alberta at a Crossroads’.
The findings, which were announced on Jan. 28, reported that Alberta’s royalties are comparable with other jurisdictions, although royalty structures for crude oil, liquids and natural gas need to be addressed. It also calls for modernizing future royalty framework and more transparency on royalty calculations.
However, it seems like not much is going to change about the royalty process.
Little Bow MLA David Schneider, of the Wildrose official opposition, for one is glad that the oil royalty review is finally done. Maybe now Alberta’s oil industry can catch a break and start attracting investors again.
“It’s been a tough one on everybody since it was announced,” said Schneider.
“Right from the beginning, it’s had a lot of damage to investment and investor confidence in Alberta. At the end of the day, uncertainty is not good business anywhere, but certainly, when you’re dealing in this kind of climate, with companies that freely do pay the freight in this province, it did not do much good for investor confidence in Alberta.”
The NDP had promised during last year’s provincial election to conduct a royalty review, in order to ensure Albertan’s were getting their fair share.
Unfortunately, during the course of the review, the process had caused a lot of uncertainty for the province’s oil industry during a time when the price of oil was falling, causing speculation that investors were going to look elsewhere.
“It certainly appears that calling for this public review was not necessary… (there was) very little change. It is real clear that Alberta is getting their fair share of that resource,” said Schneider.
“It took eight months to get that review done. We’re (the Wild Rose party is) concerned that the government won’t assure Albertans and investors and oil companies that they’ll not be hiking rates when oil prices come back.”
Now, they are glad that the NDP government has decided to moderate its position on oil in the province, but he and the rest of the Wildrose party are disappointed that the review didn’t take into consideration the current state of the province’s economy.
“The review panel didn’t take into account is the serious consideration the overall damage that the government’s policies have done to Alberta’s ability to compete against, what I would call, other energy producing jurisdictions.”
Places such as Texas and Pennsylvania have become more attractive to invest in while the review was underway, and it is not good for either Alberta or Canada when our investors leave for other places, according to Schneider.
“When Alberta takes a bit of a hit, it shows up, Canada-wide.”
The review had caused a bit of a stir amongst investors and oil companies in the province. However, now that it is over, more structure will come into place for the industry. For example, oil wells drilled before 2017 will keep their existing royalty structure for the next decade, which would inspire investor confidence.
Now that the review is over, in the short-term, he would like to see the province build, support and invest in pipeline projects, and in the long term, he would like to see low taxes and a streamlined regulatory system. This is what will help grow Albertan’s economy, because it will make for “good business, which is good for all Albertans”.
But until then, the wait is currently on for the new royalty rates, which are to be set on March 31.
“Here, we sit on pins and needles again, to see if there’s actually going to be, if the oil starts to creep up by then, what will the decisions be,” said Schneider. “Here we sit again, another delay and more pins and needles. Until March 31 and that announcement, then we can talk about what’s going to happen next.”